At the UN Climate Change conference (COP21) in 2015, Paris Agreement, a legally binding international treaty has been signed to tackle climate change by 193 countries and agreed upon to limit global rising temperature to 2 o C above pre-industrial levels and to pursue efforts to limit it to 1.5o C. India in response to achieve those goal, released their Nationally Determined Contributions (NDCs) aligning with UN SDGs & global ESG movement. The ambitious goals can only be achieved with the contribution of Indian businesses and companies in India are aware of the risk and opportunities that is emerging because of the climate change and being ready for such type of drastic changes in coming times has become vital for the organisations. Environment, Social & Governance is not merely about ticking boxes; it’s about building a fundamental base for the transformation towards sustainable business practices. It has become a new cornerstone for modern business strategy and certainly impacting the operations of companies, their communications and ways in which they create value.  
 

What is ESG? The most demanding challenge of our time

As the growing importance worldwide, India is also witnessing a growing significance of Environmental, Social, and Governance (ESG) for businesses and their long-term sustainability. ESG and its growing importance for business world is driven by various factors, such as access to operational efficiency, regulatory requirements, green capital, impact on valuations, consumer demand and stakeholders’ expectations. Due to the climate change, the environmental preservation due to the increase of atmospheric emission of carbon, rising temperatures, melting glaciers, sea-level rise, generation of massive e-waste and non-degradable materials. Paris agreement has helped accelerating ESG movement and encouraged countries to declare their net zero goals and sustainability roadmap; consequently, India has also committed in their nationally determined contributions (NDCs) to be net-zero by 2070. Due to these developments, most responsible corporates have developed a ESG strategy and action plan with well-defined goals. The measures include a substantial shift towards renewable energy, recycling of waste, effluent treatment plants and afforestation.
 

Step-by-Step Approach to Defining ESG Goals

Recognizing Core ESG Priorities

Whether it’s the identification of core ESG matters or setting appropriate, specific and achievable goals, Businesses need to go through the process of materiality assessment. The process of Materiality assessment is intense and requires specific expertise, which then on completion gives the output about the material issues specific to the organisation’s operations, future viability of business and relevant to stakeholders. Further, they can be divided into four main pillars: Environment, Social, Governance and economic. As per the need of the organisation they can be prioritised, and relevant sustainability initiatives can be implemented for the long-term viability of the business. 
 

Aligning ESG Initiatives with Corporate Strategy

In this evolving and competitive market, businesses cannot afford to not integrate Environment, Social and Governance (ESG) in their corporate strategy and in their overall operations. A significant number of studies highlights the role of ESG factors in creating value for the investors, stakeholders, long term sustainability of the business and to outperform competition. According to the reports, organisations that adopt ESG principles may see up to a 10% increase in revenue and a reduction in costs by as much as 20% due to improved resource efficiency.
 

Setting SMART ESG Goals for Success

In current times, where it is established that having ESG strategy is not only crucial to sustain in the competitive market but also gives an edge over your peers, increased revenue and helps in gaining stakeholder trust. So, to further this, having an ESG strategy is one thing but for the on ground implementation of it, the organisations not only need ESG goals but they should be implementable and should provide a positive impact. For effective ESG goals implementation a framework of SMART goals can be followed - Specific, Measurable, Achievable, Relevant, and Time-bound.

Key Factors Driving ESG Initiatives

1.    Regulatory Compliance

Government Policies

The Indian government was the first in the world to bring a legislation for the industries to create a positive social impact & for the welfare of society to implement “The CSR Act, 2013”. As per the act, companies mandatorily need to spend 2% of their profit on their corporate social responsibility and carry out CSR activities as described in the 7th schedule of the act. Further, Securities and Exchange Board of India (SEBI) introduced Business Responsibility and Sustainability Reporting (BRSR) and made it mandatory for the top 1000 companies, which gave push to rating agencies to access publicly available reports of organisations for evaluation & peer comparison. Recently, the regulations about the BRSR Core assurance and assurance of the value chain for the 75% of the value is pushing the industries to keep up with the regulations to meet the ESG targets contributing to the national goals and reduce the impact of climate change.


Environmental Regulations

Indian government has become stricter to implement environmental laws, renewable purchase obligation, waste (solid) management rules 2016 & energy laws aligning with the global environmental conservation laws, and organisations should be ready to stand the heat of non-compliance in the form of penalties and reputational damage if they fail to reduce their carbon footprint, manage waste, and irresponsible use of resources.


2. Access to Capital & Better Valuation

Investor Expectations

Global and domestic investors are increasingly incorporating ESG criteria into their investment decisions. Indian companies with strong ESG performance are likely to attract more investment, which includes ESG-focused funds. After the SEBI intervention to push green finance & regulation about BRSR mandate and regulation for ESG rating providers, the companies ready with their ESG strategies and goals will likely attract investment based on their ratings.


Lower Cost of Capital

As recent studies state that companies having clear ESG roadmap and targets are performing well against those having poor ESG ratings. Companies with good ESG ratings may benefit from lower borrowing costs, as lenders perceive them to be lower risk.


3. Reputation and Brand Value

Consumer Awareness

Indian consumers, especially the younger generation, are becoming more conscious of the social and environmental impact of their purchases. Consumers prefers appliances with high energy efficiency and better star ratings because of the ESG awareness at all levels. Companies with strong ESG credentials can build trust and brand loyalty.

Global Standards

For Indian companies looking to expand internationally, aligning with global ESG standards can enhance their reputation and ease entry into foreign markets. In India, many top hundred companies use GRI for their non-financial reporting to align with global standards and attract international investors.


4. Operational Efficiency 

Resource Management:

Adopting sustainable practices can lead to cost savings through efficient use of energy, water, and raw materials. For instance, renewable energy adoption can reduce dependency on fossil fuels and lower energy costs.
 

Risk Management:

ESG helps in identifying and managing risks related to environmental impact, social issues, and governance. Many companies have their ESG vision and mission incorporated in their corporate strategy. This proactive approach can prevent disruptions and ensure long-term business sustainability.
 

Do’s And Don'ts While Setting Effective Goals

Involve Stakeholders

Stakeholder engagement is crucial for successful ESG goal setting. You should consider involving employees, customers, suppliers, and local communities in the decision-making process. Understanding their perspectives will help you set goals that align with the expectations and values of your stakeholders.


Align ESG Goals with the Overall Business Strategy.

To unlock strategic value, Businesses must integrate ESG considerations into the company's strategic planning process. This involves identifying ESG-related risks and opportunities and incorporating them into the overall business strategy, sustainability and responsible practices.


Establish Specific and Realistic Goals.

Organisations needs to understand that setting specific and realistic ESG goals involves the identification of material issues specific to their operations and stakeholders. Goals needs to be measurable (for example reducing carbon emission to a certain percentage), time-bound (reduction targeted to a certain timeline), achievable and most importantly aligning with their business strategy.  

Best Practices for Implementing ESG Goals

Aligning ESG Goals with Corporate Strategy  

As the India’s Panchamrit goals of 2030 (500 GW non-fossil energy, 50% renewable energy integration, reduction of 1 billion tonnes of carbon emission, 45% reduction in carbon intensity and achieving net zero by 2070) at COP26, requires greater commitment from corporates in their corporate strategy. Integrating ESG goals into a company’s strategy ensures alignment with long-term objectives while fostering sustainable growth. This requires identifying material ESG factors, setting clear objectives, and ensuring they complement business priorities. By embedding ESG into decision-making, businesses create shared value for stakeholders and enhance resilience.
 

Execution and Implementation Strategies  

Effective ESG implementation involves creating a roadmap with actionable steps, assigning responsibilities, and building employee awareness. Regular training, cross-department collaboration, and leveraging technology can streamline efforts. Embedding ESG into everyday operations ensures accountability and progress toward established goals.
 

Monitoring, Measuring, and Reporting Progress  

Consistent tracking of ESG initiatives is essential for transparency and accountability. Use metrics aligned with global standards, establish regular review processes and communicate outcomes through detailed reports. Clear reporting not only builds stakeholder trust but also highlights areas of improvement.
 

Encouraging Innovation and Collaboration

Innovation and collaboration drive ESG success by fostering creative solutions to complex challenges. Encourage partnerships with stakeholders, invest in R&D for sustainable practices, and create platforms for knowledge-sharing. This approach fuels impactful initiatives and enhances competitive advantage. In India, collaboration with associations like Global Cement and Concrete Association (GCCA) helping cement industry to become net zero, The Steel Authority of India Limited (SAIL) in collaboration with industries wants to achieve net zero by 2070. 
 

Benefits of adopting ESG practices

Improved risk management  

ESG practices help identify and mitigate risks, such as regulatory fines or reputational damage. Proactively addressing these risks strengthens resilience and builds stakeholder confidence.

Enhanced portfolio performance

Companies with strong ESG practices, better ratings and remarkable progress on key performing indicators (KPIs) often attract more investors and improve financial performance. Sustainable investments provide long-term stability and appeal to ESG-conscious stakeholders, boosting value creation.

Positive Environmental Impact

Adopting eco-friendly initiatives like energy efficiency and waste reduction mitigates negative environmental effects. This approach ensures businesses contribute meaningfully to global conservation efforts.

Greater innovation and adaptability

ESG practices inspire creative solutions to complex challenges, driving innovation. Businesses become more adaptable, staying ahead of market trends and regulatory changes while building competitive advantage.

Strengthened Regulatory Compliance

Aligning operations with ESG standards ensures compliance with evolving regulations. This proactive approach minimizes penalties and strengthens stakeholder confidence in the company's sustainability commitments.

Support for Global Sustainability Goals

ESG integration aligns businesses with UN SDGs and other global goals, contributing to broader societal benefits. Companies in India use BRSR which is inspired from GRI and SDGs to showcase leadership, contribute to global sustainability in addressing critical global issues while building their reputation.
 

FAQS

What are the main ESG standards?

The main ESG standards include AA1000, GRI, ISSB, ISO14001, ISO14064, ISO14040, ISO50000 and the reporting frameworks are CDP, TCFD, TNFD, and BRSR. For greater alignment with global sustainability and better transparency an organisation can use a mix of two framework and standards or one commonly used and globally recognised standard. 
 

How often should you report on your ESG program progress?

ESG reporting in India is done annually using BRSR, however top companies incorporate GRI, CDP and few other standards to attract international investment and stay globally relevant also frequent updates build transparency and maintain stakeholder trust.